A General Profit

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A General Profit

09/19/2005

t’s not a major category, but it offers major margins. And retailers that do it well can add a chunk of change to the bottom line. We’re talking general merchandise, and at Arkansas Valley Petroleum’s 15 Fiesta Mart stores, it’s helping drive the profit up.

“We are showing a 30 to 40 percent increase in total sales in all of our stores, with some showing more than a 100 percent increase over last year,” said Rick Bradley, manager of retail operations at Arkansas Valley. “General merchandise contributes with great margins. We gross 40 to 50 percent on our novelty items.”

Fiesta Mart offers film, batteries and school supplies as part of its 12-foot health and beauty section as well as a 12-foot automotive section with car light bulbs, tools, anti-freeze, windshield wash, oils and additives.

"We have three 12-foot sections in the majority of our stores," said Bradley. "One is double-sided, with grocery and automotive, and the other is health and beauty. We also have a novelty item end-rack at a total of 8 linear feet."

While McLane Co. supplies the automotive and HBC sections, where the company places weekly orders and updates the shelves themselves, the company relies on Mountain View Marketing, based in Colorado, to handle its novelties.

"We've offered novelties in our stores since 2002, but recently we switched to Mountain View because we felt we needed to change the selection of products we had," noted Bradley. He came across the company by attending trade shows, including the NACS Show and McLane's trade shows.

"We get flyers and catalogs in the mail all the time for general merchandise, but I would rather talk to a person to see if their company is a fit, and trade shows allow that to happen. Mountain View has a good selection, which includes toys, plush animals, bubbles and sunglasses, and that is why I chose them," said Bradley. "Our novelty sales have increased, especially the sunglasses, and I see a lot more of it being purchased overall."

He also likes that the company manages the category, and it is out of his hands. "They manage the category for us and come in every two weeks to reset the rack," he explained. "Every three visits, or 60 days, the rack is changed out completely with new products because they redo a third of the rack each time they come in."

The company never puts the same product in a store more than once, and every two weeks, 15 new items replace 15 old ones. Also, if an item is not selling, Mountain View will simply switch it for a new one.

"Everything is a guaranteed sale," said Bradley. This program, known as The Novelty Outfitters DSS (direct-store service) Program, sets mandatory delete dates for its products the day they go into a store so selection and rotation is guaranteed, according to the company.

What's Selling?

Fiesta Mart stores are located in Tulsa, Okla., and surrounding areas. Four of the stores are in rural, small towns and three are located on highways.

"The automotive and novelty sections sell much better at the highway locations, and they include some souvenir items," noted Bradley. "By the time families stop at the store, they are looking for something to entertain the kids."

The majority of the stores have the same sets in them and average 2,000 square feet, but some of the smaller stores do not have the same merchandise. While Bradley explained all the stores feature the 12-foot automotive section, some products may vary. But only one store does not feature the novelty section, and this is due to space constraints.

In the automotive category, the company offers between 80 and 100 SKUs, and margins run from 35 percent to as much as 50 percent.

"The windshield wash solution is our best product in terms of sales, but we sell quite a bit of oil too," said Bradley. "We carry the major brands including Penzoil and Citgo. We don't sell a lot of the additives, but we keep three bottles of each one and are very competitively priced."

While the school supply items do very well, the film and batteries see spikes during certain seasons, including Christmas and in the early summer months for graduations and vacations.

"Around Christmas time we can't keep enough film and batteries in stock," said Bradley. "That is the best time of year for the batteries and we sell quite a few. We also keep disposable cameras in stock."

The novelty rack, maintained by Mountain View, offers between 50 and 60 SKUs and is the company's best overall section as far as margin is concerned. "Novelty offers the best margin, and candy follows along with automotive," said Bradley.

He explained the children's items do well including the toys and other impulse novelties because parents see it as something to entertain their children while driving. But the company also does well with seasonal items.

"At the start of the football season we will have items with team logos, and they always do well," said Bradley.